How Many Service Providers Can Escape "Dumb Pipe" Status?

One universally hears service provider executives arguing they want to avoid becoming “dumb pipe” connectivity providers. What is not so clear is how many service provider entities will actually be able to do so in a significant way.

For many--perhaps most--suppliers, being an efficient dumb pipe provider is possibly the only viable path forward. The problem is that most proposed new services and applications require scale.

Whether it is entertainment video, mobile banking and payments, connected car, connected health or other Internet of Things apps, viable suppliers must achieve scale. Almost by definition, most smaller providers will be unable to do so.

That will mean an industry dominated by 10 global service providers, some predict. Those handful of firms can become branded suppliers of applications. Smaller providers will struggle to reduce costs enough to remain viable primarily as suppliers of access services.

In other words, the advice to “move up the stack” will be viable for a relative handful of firms. Most service providers will focus primarily on access. In the Internet era, that means being suppliers of “dumb pipe” Internet access.

Moving “up the stack” will be necessary and possible for the webscale global giants. Beyond some limited scenarios, smaller providers will lack the scale to create viable new application or services.
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